U.S. manufacturing shrank in June for the first time in nearly three years, a troubling sign as evidence builds that economic growth is slowing. The Institute for Supply Management, a trade group of purchasing managers, said Monday that its index of manufacturing activity fell to 49.7. That's down from 53.5 in May and the lowest reading since July 2009, one month after the recession officially ended. Readings below 50 indicate contraction. Production fell to a three-year low and a measure of new orders plummeted by the most in more than a decade, suggesting the weakness will likely persist in the coming months.
(MSNBC| July 2, 2012)
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U.S. employment rolls edge up

The economy added a disappointing 80,000 jobs in June as the unemployment rate held steady at 8.2%, the U.S. Department of Labor reported today. Manufacturing added 11,000 jobs last month. Growth in the second quarter averaged 10,000 per month, the department announced, compared with an average of 41,000 per month during the first quarter of 2012. In June, employment increased in motor vehicles and parts (7,000) and in fabricated metal products (5,000). Calling it the "weakest recovery since the Great Depression," economist Peter Morici said "nearly the entire reduction in unemployment since October 2009 has been accomplished through a significant drop in the percentage of adults participating in the labor force-either working or looking for work." Warning that growth may be even slower in the second quarter, Morici said the economy is "dangerously close to stalling and falling into recession."
(Industry Week| July 6, 2012)
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In the first-quarter of 2012, hourly compensation from previous quarter, annual rate (revised) was unchanged in total manufacturing, down (-0.6 percent) in durable manufacturing and up (+1.0 percent) in nondurable manufacturing.

In the first-quarter of 2012, hourly compensation (revised) of all manufacturing workers decreased (-0.7 percent), compared to a (+2.8 percent) increase during the first-quarter of 2011. Real hourly compensation in the total manufacturing sector decreased (-3.4 percent) in the first-quarter of 2012, compared to (+0.6 percent) increase in the first-quarter of 2011.

In May 2012, production of nondurable goods was down (-0.2 percent) from the previous month. The nondurable manufacturing industries that registered decreases in output included textile and product mills (-0.7 percent), plastics and rubber products (-0.5 percent), chemicals (-0.4 percent), paper (-0.4 percent), and food, beverage and tobacco products (-0.3 percent). The nondurable industries that registered increases in output included apparel and leather (+1.0 percent), petroleum and coal products (+0.9 percent), and printing and support (+0.3 percent).

Manufacturing sector productivity was up (+5.2 percent) in the first-quarter of 2012, as output increased (+10.0 percent) and hours increased (+4.6 percent). Productivity was up (+9.9 percent) in the durable goods industries and up (+0.1 percent) in the nondurable goods industries. Unit labor costs in manufacturing decreased (-4.9 percent) in the first-quarter of 2012, and decreased (-2.9 percent) over the last four quarters.

In durable goods industries, productivity was up (+9.9 percent) from previous quarter, as output increased (15.4 percent), while hours worked increased (4.9 percent).

In nondurable goods industries, productivity was up (+0.1 percent) from previous quarter, as output increased (+4.3 percent), and hours worked increased (+4.1 percent).

Shipments of manufactured durable goods in May, up five of the last six months, increased $1.7 billion or 0.8 percent to $224.3 billion, revised from the previously published 0.7 percent increase. This followed a 0.7 percent April increase.

Economic activity in the manufacturing sector contracted in June for the first time since July 2009; however, the overall economy grew for the 37th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®.

Manufacturing contracted in June as the PMI registered 49.7 percent, a decrease of 3.8 percentage points when compared to May's reading of 53.5 percent. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

The percentage-point changes in the components of the PMI in June were New Orders -12.3 points increase to 47.8; Production, -4.6 points decrease to 51.0; Inventories, -2.0 points decrease to 44.0; Employment, -0.3 points decrease to 56.6; and Supplier Deliveries, +0.2 points increase to 48.9.

Prepared by
Director of Office of Trade Industry Information
Manufacturing and Services
International Trade Administration
U.S. Department of Commerce
(202) 482-4691

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